What happened with AXTI today?
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AXT supplies the base wafers used to make semiconductor devices when silicon cannot meet their performance requirements. Its materials include indium phosphide, gallium arsenide and germanium, used in telecommunications, LEDs, lasers and solar cells. Most substrate customers grow additional material layers on these wafers—a process called epitaxy—before supplying them to chip manufacturers and other device makers. AXT neither adds these layers nor makes the chips.
Substrate sales provide most of AXT’s revenue. Its raw-material subsidiaries also sell inputs such as purified gallium and crucibles used in substrate production. Part of their output supplies AXT’s own factories; the rest is sold to outside customers.
AXT manufactures all its products in China, and customers in China provide most of its revenue. Export sales depend on Chinese permits for its indium phosphide, gallium arsenide and germanium substrates. Its subsidiary Tongmei has received some permits, but approval timing remains uncertain. It has not received permits to export gallium arsenide substrates to U.S. customers, which AXT describes as having significant military involvement.
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AXT also depends on Chinese export approvals and faces substrate rivals absent from this list, including Sumitomo Electric Industries, JX and Freiberger Compound Materials.
Coherent and AXT share exposure to laser and optical-transceiver demand: Coherent sells these devices to datacenter, communications and industrial markets, while AXT sells InP and GaAs wafers used to make those types of devices. Coherent’s datacenter and communications transceiver and laser business is the part to watch for demand relevant to AXT.
Lumentum and AXT depend on demand for optical-network and industrial lasers: Lumentum sells laser chips for customers to integrate and complete optical modules and industrial lasers, while AXT sells InP and GaAs wafers used in those device categories. Watch Lumentum’s laser-chip, optical-module and industrial-laser sales rather than treating all its revenue as a signal for AXT.
Applied Optoelectronics sells laser chips and optical modules for networks whose expansion drives demand for AXT’s InP wafers. Its internet-datacenter revenue is a useful line to watch; total revenue also includes cable-TV amplifiers that use RF and digital electronics rather than optical components.
Fabrinet’s production for optical-communications and industrial-laser equipment makers reflects demand in markets where AXT sells wafers for semiconductor devices. Fabrinet earns manufacturing fees from those equipment makers, so watch its optical-communications and industrial-laser work rather than its unrelated manufacturing businesses.
Skyworks’ choice of materials for the wireless RF chips it sells can change demand for AXT’s GaAs wafers, not just move with wireless-device demand. Watch news of Skyworks adopting alternatives to GaAs, which could reduce the need for that AXT product.
Tower Semiconductor and AXT both benefit from datacenter network upgrades using silicon photonics: Tower manufactures those chips for chip companies and module integrators, while AXT sells InP wafers whose demand rises with those upgrades. Watch Tower’s silicon-photonics business rather than its broader wafer-manufacturing revenue.
Corning and AXT share exposure to fiber-optic network spending: Corning sells optical-communications infrastructure, while AXT sells semiconductor wafers used to make lasers for those networks. Corning’s Optical Communications sales are the relevant signal, not its display, automotive or life-sciences businesses.
Skyworks Solutions Inc earningsSWKS
Skyworks' report and related disclosures can show whether its wireless RF chips still use gallium arsenide, a material choice that changes demand for AXT's GaAs wafers.
Look at Skyworks' comments on RF-chip demand and material platforms, especially any disclosure of a move to alternatives. Steady chip demand without signs of substitution would leave this source of support for AXT's GaAs wafers intact; a disclosed shift to other materials would point to lasting pressure on those wafers even if chip demand remains sound.
AXT Inc earningsThis company
AXT's report will show whether indium phosphide wafer sales are recovering and whether higher shipment volume is easing the pressure of production costs on profit.
Read indium phosphide wafer sales alongside gross margin, the share of revenue left after production costs. If InP sales recover and gross margin improves, more shipments are helping AXT spread fixed factory costs; if sales remain weak and margin stays low, uncertain export permits, underused capacity or other production pressures are still weighing on the business.
Tower Semiconductor Ltd earningsTSEM
Tower Semiconductor's silicon-photonics business can signal the pace of data-center network upgrades, which also drive demand for AXT's indium phosphide wafers.
Watch Tower Semiconductor's comments on silicon-photonics demand and activity, rather than treating all its wafer-manufacturing revenue as a signal. Strength in that business would show data-center upgrades supporting these chips and would support the demand case for AXT's InP wafers; weakness would mean this source of demand remains uncertain.
Coherent Corp. earningsCOHR
Coherent's report will show demand for optical transceivers and lasers in data-center and communications markets, devices made with AXT's InP and GaAs wafers.
Focus on Coherent's data-center and communications transceiver and laser business, not revenue from unrelated lines. Stronger sales would show support for demand for devices made with AXT's two wafer types; weaker sales would point to softer end-market demand for those wafers, but Coherent's results alone cannot establish how much AXT sold.
